Estate Planning

The great use of life is to spend it for something that will outlast you.
William James

Overview

With a comprehensive team that includes highly experienced estate planning lawyers, Choate Wealth helps clients achieve their goals through a combination of core estate planning (such as wills and revocable trusts) and advanced lifetime strategies (such as irrevocable trusts, GRATs, family LLCs, etc.).

As our clients’ needs evolve, our services evolve with them, and we offer wider-ranging support, such as advising families through life transitions, providing counsel on real estate and business transactions, offering other business or personal advice, and educating and mentoring younger generations. Additionally, we work closely with our colleagues at Choate on matters involving fund formation, executive compensation, and intellectual property.

Client Story:

Managing Family Office Transition Across Generations

Navigating an Entrepreneur Family’s First Liquidity Events

Establishing a Founder’s Legacy for Future Generations

Coordinating a Global Family Office

Sharpening Philanthropic Focus for Wealthy Donor

Building a Comprehensive Philanthropic Plan for Search Fund Investor

Improving Family Governance for Large, Multi-Generational Family

Establishing a Single-Family Office for Ultra-High Net Worth Entrepreneur Family

Designing a Core Wealth Plan for Ultra High Net Worth Family

Challenges:
Long-time legal clients of the firm originally built out their own stand-alone family office. However, as the older generation wanted to retire, and no younger family members were interested in taking over the CEO role, the family recognized that it needed a different solution.

Solutions:
The family hired Choate Family Office to serve as its outsourced family office, leveraging our 60+ member staff, and our legal, tax, and investment expertise. Choate focused on three key areas to address the family’s needs.

1. Tracking and reporting

The family invested in a wide variety of private equity, search funds, hedge funds, real estate, and publicly traded assets. To replace an outdated collection of spreadsheets, we designed and deployed a comprehensive investment tracking and reporting system. Today, family members and staff have real-time access to both consolidated investment reports and tailored net worth statements, as well as visibility into outstanding commitments, distributions, contributions, and changes in asset values.

2. Management of public and private investments

Choate developed customized investment portfolios for the family’s estate planning vehicles, including private foundations and family trusts. We developed special investment guidelines for the liquid portion of the family’s investment portfolio in order to complement sizeable private holdings.
As part of our ongoing work for the family, we handle the day-to-day administration of their private investments. Members of the family’s Choate team monitor third-party investments and manage capital calls, distributions, cash needs, changes in investment activities, and all related tax matters. We helped the family establish several new investment vehicles in order to efficiently pool family capital and to reward key members of the family and staff in a tax-efficient manner.

3. Tax optimization

Our lawyers, tax advisors, and trust administrators regularly perform extensive tax optimization and charitable gifting analysis, resulting in material tax savings every year. This tax analysis is continually updated, ensuring that the family’s charitable giving program is always up-to-date and is positioned for maximum tax efficiency.

Client:
Husband and wife are each scientific founders / advisers to multiple life sciences companies

Challenges:
Each spouse had an interest in a separate company that recently went public, providing the couple with their first significant liquidity events

Solutions:

Reviewed insider trading policies and vesting schedules to determine whether clients should implement a 10b5-1 sales plan
Formulated and executed a stock sales plan to provide clients with necessary diversification and liquidity, while accommodating low daily trading volume and tax implications of sales
Provided comprehensive review of financial holdings and goals, and prepared a diversified investment plan
Implemented core estate plan, including helping clients purchase real estate and other assets through LLCs that shield family from liability
Implemented lifetime gifting plan to create irrevocable trusts for children, and charitable foundation to be run by clients and future generations

Results:
Lifetime gifts saved clients millions in future estate taxes

Charitable foundation provides tax benefits and “glue” that holds older and younger generations together

Choate team provides ongoing investment, estate planning, and financial advice as additional opportunities arise, and family and wealth grows

Client:
Long-time founder and owner of consulting firm

Challenges:
Complex estate planning goals requiring coordination across multiple disciplines

Solutions:

Choate Wealth lawyers have implemented sophisticated estate planning, including grantor retained annuity trusts (GRATs), irrevocable trusts, and core estate planning documents that save significant taxes
Choate partners serve as trustees and executors with highest fiduciary duties
Assisted with a comprehensive evaluation of life insurance coverage
Choate Investment Advisors invests liquid portfolio, including exit proceeds
Quarterly estate planning & investment calls with the family, including separate “next generation” calls to educate younger family members

Results:
Proactive gift planning has moved significant wealth to trusts for the next generation, tax free

Education curriculum has helped foster the next generation of family investors

Choate Wealth team, together with Choate’s Private Equity group, is helping client explore gifts of stock in next startup at pre-revenue stage

Client:
Family office with concentration of wealth in public company; access to unique investments; assets in Europe. Prior connection to Choate.

Challenges:

No existing estate plan
Serious privacy concerns

Solutions:

Bring in subject matter experts (PR, philanthropy, high-end real estate, local counsel in foreign jurisdictions)
Guide and implement impactful charitable giving through private foundation
Quarterback other service providers

Results:
Restructured existing family wealth vehicles for maximum tax and estate planning impact

Developing global philanthropic mission and improve tax efficiency of giving to offset taxable income

Ensuring privacy for the entire family

Client:
Wealthy client with unfocused charitable giving that lacked a cohesive strategy

Challenges:

Limited understanding of history of personal giving
Seeking to focus on underserved causes

Solutions:

Collected and analyzed several years’ worth of data on client’s charitable gifts
Identify areas of previous charitable focus
Compared against national philanthropic trends

Results:
Clear understanding of opportunities to maximize the impact

Refocus charitable giving going forward

Build strategic framework for private foundation

Client:
Very successful search fund investor and his family

Challenges:

Leave most of family net worth ($500M+) to charity
Ensure truly perpetual impact
No existing charitable plan

Solutions:

Choate implemented a charitable structure tailored to client’s needs, including a private foundation and a supporting organization
Developed and executing a program for annual gifts of privately held investments to charities over many years
Optimized charitable gifts of publicly traded stock post-SPAC acquisition while client is serving on the board of directors
Choate is serving as a back office for the charities
Lead ongoing discussions with family members and other team members about strategy and day-to-day execution

Results:
New charitable entities are up and running

Allow client to focus on desired impact of charitable giving

Challenges:
Many years ago a large, multi-generational family established several pooled investment vehicles to manage the family wealth. These investment funds were run by members of the senior generation, who over time wanted to involve the next generation in family governance.

Solutions:

Our lawyers were already providing comprehensive estate planning and tax advice to the individual family members at all generations, as well as corporate legal advice to the funds.
Building on that relationship, we helped reinvigorate the family’s participation in managing its funds.

1. Transition leadership to the next generation

With the help of the entire team – including wealth management and corporate lawyers, fund administrators, trust advisors, and investment specialists – we helped move the “family CEO” role to a member of the next generation through a transparent election process. The transition was a success, with more members of the younger generation joining the governing board each year under the guidance and supervision of their parents.

2. Educate Board Members on roles and responsibilities

To further facilitate the transition, we worked with board members – both individually and together – to educate the younger family members about the board’s responsibilities and family history, as well as important corporate governance, securities law, and tax considerations affecting the family.

3. Simplify and refocus investment strategy

A recurring theme emerged from these conversations: The family’s prior investment advisors had implemented an overly complicated investment portfolio that did not resonate with the family and left many board members feeling that their voices were not being heard.
After a lengthy diligence and interview process, the family hired Choate to streamline and rebuild the investment portfolio. Over the course of a series of board meetings, we helped the family understand the composition of its investments and initiated the process for repositioning the portfolio to support both ongoing distribution needs and the need for continued long-term growth to provide for future generations.</li

Challenges:
An ultra-high net worth family sought to create a brand new family office to help manage its rapidly increasing wealth, fueled by a highly profitable closely-held business.

Solutions:
We were hired to replace a family’s former estate planning attorney, whose expertise struggled to keep up with the family’s quickly evolving needs. We immediately recognized an opportunity to engineer a single-family office from the ground up that was customized to the family’s needs:

1. Create a family office structure

We began by creating a legal structure for the new family office, including several investment vehicles designed to pool existing family wealth. These new vehicles – which include series LLCs and special-purpose investment entities – provide a robust framework for pursuing the family’s investment interests. We help with all aspects of vehicle management and compliance, including complying with SEC rules for family offices.
This family office model proved to be very flexible, making it possible for the family to quickly deploy capital to take advantage of changes in the tax laws. For example, when the family’s advisors identified an attractive “qualified opportunity zone” investment, it took just a couple of days to fit that asset into the family’s overall investment portfolio in a tax-efficient manner.

2. Help build out a team

As the legal work was getting underway, the family was searching for a dedicated person to lead their new family office. Through our network, we helped the family locate a new family office director with an ideal background and the right cultural fit. Filling this critical role allowed the family to create a single point of contact for all family members regarding wealth planning, lifestyle and concierge services, and freed up other team members’ time to focus on their own specialties.

3. Implement high-impact, high-visibility philanthropy

With the right support structure in place, the family turned to one of its key priorities: high-impact, high-visibility philanthropy. We helped the family negotiate several “front page of the newspaper” charitable gifts with local institutions, transforming their charitable impact and securing prominent naming rights for the family in perpetuity.

Challenges:
A couple had done very little estate planning and needed help creating an updated plan reflecting their increased wealth, as well as advice on how best to transfer assets to their descendants in the most tax-efficient manner, and guidance on creating a shared family structure for charitable giving.

Solutions:

1. Create a core plan

As an initial step, Choate created a core plan for the clients that governs how their property will pass on death and who will make decisions for them if they are ever incapacitated. This plan consists of wills, revocable (changeable until death) trusts, health care proxies, and durable powers of an attorney. With their core plan in place, the clients were ready to engage in lifetime planning for charity and for their descendants.

2. Create a private foundation

To facilitate the family’s charitable giving now and into the future, Choate created a private foundation for the parents to control initially, inviting their children onto the board as they aged into maturity. With Choate’s help, the clients use their private foundation as a means of educating their children about investments and the family’s philanthropic goals, introducing the next generation to the family’s wealth in an altruistic environment.

3. Create generation-skipping trusts (which may also benefit the spouse)

To reduce the clients’ future estate taxes and leverage large lifetime gift tax exemptions, Choate created several generation-skipping irrevocable trusts for the clients, including trusts funded with gifts of private investments, preexisting and new insurance policies, and liquid assets. The funded trusts are out of the clients’ estates and will save the clients material estate taxes on death. Choate attorneys serve as trustees, subject to the family’s ability to remove and replace trustees at any time. Several trusts include one of the spouses as a potential beneficiary, providing a “safety valve” in case the clients ever feel that they over-gave to the next generation and need assets for their own future support.

4. Introduce additional planning techniques

Choate also helps the family take advantage of planning techniques that require no gift tax exemption, such as transfers to grantor retained annuity trusts (or “GRATs”). GRATs transfer the upside appreciation in assets to the next generation, entirely gift-tax-free, while the client retains the original principal. Examples of other tax free planning for the family include creating 529 plans for grandchildren’s education costs funded with annual exclusion gifts and direct payments of medical and tuition expenses for extended family members.